Group Members:

DULNUAN, KENNETH
MANDIIT, CONCEPTION
PALSIW, EDWARD
SIBLAGAN, ROGER JR.

WAREHOUSE RECEIPTS LAW

(ACT 2137, AS AMENDED)
Warehouse Receipt
It is a written acknowledgment by the warehouseman that he has received and holds certain goods
therein described in his warehouse for the person to whom the document is issued. (NCC, Art.1507-
1520)

Warehouseman
A person, natural or juridical, lawfully engaged in the business of storing of goods for profit (WHR Law,
Sec. 58).

Warehouse
The building or place where goods are deposited and stored for profit.

What is the purpose of the warehouse receipt law?

1. The purpose of the Warehouse Receipts Law is to regulate the status, rights and liabilities of
parties.
2. In particular, it prescribes the rights and duties of a warehouseman and to regulate his
relationship with
(a) the depositor of the goods, or
(b) the holder of a warehouse receipt, or
(c) the person lawfully entitled to the possession of the goods, or (d) other persons. It also
covers all warehouses, whether bonded or not.

Distinguishing the Warehouse Receipts Law from General Bonded Warehouse Act

The Warehouse receipt law refers to the rights and obligations of parties in a warehousing
contract, while the General Bonded Warehouse Act refers to state regulation and supervision of
warehouses.

Who may issue a warehouse receipt?

1. Warehouseman, whether public or private, bonded or not (WHR Law, Sec. 1).
2. A person authorized by a Warehouseman.

In what form should warehouse receipts be executed?

It need not be in particular form but must embody within its written or printed terms
1. Location of the warehouse
2. Consecutive number of the receipt
3. Date of the issue
4. A statement whether the goods received will be delivered to bearer, to a specified person or to a
specified person or his order
5. Signature of the warehouseman
6. If the receipt is issued for goods of which the Warehouseman is the owner, either solely or jointly or
in common with others, the fact of such ownership; and
7. Description of the goods
8. A statement of the amount of advances made and of liabilities incurred for which the warehouseman
claims a Lien.
9. Fees (WHR Law, Sec. 2)

What are the kinds of a warehouse receipt?

1. Negotiable warehouse receipt

It is a receipt in which it states that the goods received will be delivered to the bearer or
to the order of any person named in such receipt (WHR Law, Sec. 5). It is negotiated by delivery
or indorsement plus delivery.
No provision shall be inserted in a negotiable receipt that it is non-negotiable. Such
provision, if inserted, shall be void, and the receipt shall remain negotiable. A negotiable
warehouse receipt cannot be converted into non-negotiable (WHR Law, Sec. 5).
A negotiable warehouse receipt is not a negotiable instrument as the same does not
comply with the requisites of Section 1, Act 2031.
A negotiable receipt is negotiated by delivery when: (a) the goods are deliverable to
bearer, or (b) the goods are deliverable to a specified person and the latter has indorsed it
in blank or to bearer. If endorsed as deliverable to a person, the bearer receipt is
transformed into a an order receipt.
A negotiable receipt is negotiated by indorsement when the goods are, by the terms of
the receipt, deliverable to a specified person (Section 38, Warehouse Receipts Law)

2. Non-negotiable warehouse receipt

It is a receipt in which it is stated that the goods received will be delivered to the
depositor or to any other specified person (WHR Law, Sec. 4).
To make it non-negotiable, it is needed to be indicated in the face of the warehouse
receipt by the warehouseman issuing it that the same is non-negotiable, or not
negotiable (WHR Law, Sec.7).
Failure to mark the warehouse receipt as non-negotiable shall entitle the holder, who
purchased it for value supposing it to be negotiable, to treat such receipt negotiable.

What are the advantages of a negotiable warehouse receipt from one which is non-negotiable?
(a) goods cannot be garnished or levied upon under execution unless receipt is surrendered, or
impounded or its negotiation enjoined (Section 25, Warehouse Receipts Law)
(b) In case of negotiation, holder acquires the direct obligation of the warehouseman to hold
possession of the goods for him (Section 41, Warehouse Receipts Law), and
(c) Goods are not subject to vendors lien or stoppage in transitu (Section 49, Warehouse
Receipts Law)

DISTINCTIONS BETWEEN NEGOTIABLE WAREHOUSE RECEIPT FROM NON-NEGOTIABLE

WAREHOUSE RECEIPT

NEGOTIABLE WAREHOUSE RECEIPT NON-NEGOTIABLE WAREHOUSE RECEIPT

May be acquired through negotiation
Rights of the holder of the receipt:
1. If indorsed:
a. Acquires title to the goods as the person
negotiating (WHR Law, Sec. 41).
b. Acquires the direct obligation of the
warehouseman to hold possession of the goods
for him as if the warehouseman directly
contracted with him (ibid).
2. If not indorsed:
He may compel indorsement; other-wise, he
would acquire title as that of an assignee (WHR
Law, Sec. 43).
May be acquired through transfer or assignment
Rights of transferee:
1. Acquires title to the goods subject to the terms
of any agreement with the transferor (WHR Law,
Sec. 42).
2. Acquires the right to notify the warehouseman
of the transfer and thereby acquires the direct
obligation of the warehouseman to hold
possession of the goods for him (ibid).
NOTE: Prior to notice, the title of the transferee
may be defeated by the levy of an attachment or
execution upon the goods by a creditor of the
transferor or by a notification to the
warehouseman by the transferor or a subsequent
purchaser from the transferor of a subsequent
sale of the goods by the transferor (ibid.).
Defeats the lien of the seller of the goods covered
thereby (WHR Law, Sec. 49).
Good covered cannot be garnished, attached or
levied on execution by unless:
1. Receipt is surrendered.
2. Its negotiation is enjoined by the court.
3. The goods are impounded by the court (WHR
Law, Sec. 25).
Acquires the title as that of his transferor.
Pending notification to the warehouseman, goods
can be garnished, attached or levied on execution
Reason: Absent such notice, both the
warehouseman and the sheriff have a right to
assume that the goods are still owned by the
person whose name appears in the receipt.

NOTE: This shall not apply if the person

depositing is not the owner of the goods or one
who has no right to convey title to the goods
binding upon the owner.
Protects the purchaser in good faith and for value. The assignee only steps into the shoes of the
assignor.

What are the duties of a warehouseman?

The Primary Obligations of the Warehouseman are:

1. he must issue a receipt for any commodity that he receives for storage
2. he must exercise that degree of care in the safekeeping of the goods entrusted to him which a
reasonable careful man would exercise in regard to similar goods of his own. However, in the
absence of an agreement to the contrary, he shall not be liable for any loss or injury to the
goods which could not have been avoided by the exercise of such care
3. In the absence of any lawful excuse, he is bound to deliver the goods upon a demand by:
a. holder of a receipt for the goods, or
b. by the depositor, provided that the demand be accompanied by (1) an offer to
satisfy the warehousemans lien (2) an offer to surrender the receipt if it is
negotiable, and (3) a readiness and willingness to sign acknowledgment of
delivery of the goods if requested by the warehouseman. (Section 8, WHR law)
4. Keep the goods separate from the goods of other depositors, except if authorized by agreement
or by custom, fungible goods may be mingled with other goods of the same kind and grade.
5. A warehouseman is obliged to deliver goods to:
(a) person lawfully entitled to it. Examples: person determined by the court to be entitled to it in
an interpleader case, person who purchases the goods at an auction to satisfy a
warehousemans lien or because the goods are hazardous or of a perishable nature
(b) the person who is himself entitled to delivery by the terms of the receipt. If receipt is non-
negotiable, delivery will be to the person entitled to it under its terms or by written authority
clearly indicated therein or another document. If receipt is negotiable, to the person named or
the last indorsee.

When is a warehouseman justified to refuse to deliver the goods?

1. If the warehousemans lien is not satisfied by the claimants (WHR Law, Sec. 31);
2. Where the goods have already been sold to satisfy the warehousemans lien or because of
their perishable or hazardous nature (WHR Law, Sec. 34);
3. If the warehouse receipt is negotiated back to him;
4. When the holder does not satisfy the conditions prescribed in Sec. 8, WHR Law:
a. Non-satisfaction of warehousemans lien.
b. Failure to surrender warehouse receipt.
c. Refusal to sign the Acknowledgement receipt, acknowledging the receipt of the
goods from the warehouse;

5. The failure was not due to any Fault on the part of the warehouseman:
 a. Upon request by or on behalf of the person lawfully entitled (WHR Law, Sec. 10).
b. If the goods are lost, due to a fortuitous event exclusively.
c. If the warehouseman needs reasonable time to ascertain the validity of the claim if
someone other than the depositor claims title to the goods (WHR Law, Sec. 18).
d. If he had information that the delivery about to be made was to one not lawfully
entitled (WHR Law, Sec. 10)
e. If several persons claim the goods (WHR Law, Sec. 17).

What is Conversion?
It is an unauthorized assumption and exercise of the right of ownership over goods belonging to
another through the alteration of their condition or the exclusion of the owners right

What are the instances where a Warehouseman is liable for conversion?

1. Where the delivery is made to person other than those authorized;
2. Even if delivered to persons entitled, he may still be liable for conversion if prior to delivery:
a. He had been requested not to make such delivery; or
b. He had received notice of the adverse claim or title of a third person.

What are the kinds of alterations?

1. Immaterial if it does not change the tenor of the warehouse receipt
2. Material if it substantially changes the tenor of the receipt
3. Authorized if it is made with the authority of the holder and the warehouseman
4. Unauthorized if it is made without the authority of the holder and warehouseman. This may be
material or immaterial
5. Fraudulent if it is made with malice or bad faith by the holder with intent to defraud subsequent
holders
6. Without fraudulent intent if its is made without malice or bad faith

What are effects of alteration of the receipt on the liability of the warehouseman?
1. Alteration immaterial whether fraudulent or not, whether authorized or not, the
warehouseman is liable on the altered receipt according to its original tenor
2. Authorized material alteration the warehouseman is liable according to the terms of the
receipt as altered
3. Material alteration innocently made the warehouseman is liable on the altered receipt
according to its original receipt
4. Material alteration fraudulently made warehouseman is liable according to the original tenor
of the receipt to a purchaser of the receipt for value without notice, and even to the alterer and
subsequent purchasers with notice except that as regards to the last two, the warehousemans
liability is limited only to delivery as he is excused from any liability

What are the instances when a warehouseman is criminally liable for his acts?
1. Issuance of warehouse receipts for Good not received (WHR Law, Sec. 50).
2. Issuance of receipt containing false statement (WHR Law, Sec. 51).
3. Issuance of Duplicate negotiable warehouse receipt not marked as such (WHR Law, Sec. 52).
4. Issuance of a negotiable warehouse receipt of which he is an Owner without stating such fact of
ownership (WHR Law, Sec. 53).
5. Delivery of goods without obtaining negotiable warehouse receipt (WHR Law, Sec. 54).
6. Negotiation of receipt for Mortgaged goods (WHR Law, Sec. 55).
7. Commingling of goods (WHR Law, Sec. 24).

Other acts for which a warehouseman is liable

1. Failure to stamp Duplicate on copies of negotiable receipt (WHR Law, Sec.6).
2. Misdelivery of goods (WHR Law, Sec. 10).
3. Failure to Place non-negotiable or not-negotiable on a non-negotiable receipt (WHR Law,
Sec. 7).
4. Failure to give notice in case of Sale of goods to satisfy lien (WHR Law, Sec. 33) or because the
goods are perishable or hazardous (WHR Law, Sec. 34).
 5. Issuing receipt for non-existing goods or misdescribed goods (WHR Law, Sec.20).
6. Failure to take Care of the goods (Sec. 21, WHR Law).
7. Failure to effect Cancellation of a negotiable receipt upon delivery of the goods (WHR Law, Sec.
11).

What is a warehousemans lien?

Refers to the lien of that a warehouseman has on the goods deposited with him or on the
proceeds thereof in his hands for all lawful charges for storage and preservation of the goods, money
advanced by him in relation to such goods such as the expenses of transportation or labor, or other
related expenses.
The basis for the lien is the obligation of the depositor to pay the warehouseman for (a) Storage
and preservation charges (b) Money advanced (c) Interest (d) Insurance (e) Transportation (f) Labor (g)
Weighing, and (h)Coopering and other similar charges (Section 27, Warehouse Receipts Law)

What are the remedies available to a warehouseman to enforce his warehousemans lien?
1. By refusing to deliver the goods until the lien is satisfied;
2. By causing the extrajudicial sale of the property and applying the proceeds of the value of the
lien;
3. By filing a civil action for collection of the unpaid charges or by way of counterclaim in an action
to recover the property from him or such other remedies allowed by law for the enforcement of
a lien against personal property or to a creditor against his debtor, for the collection from the
depositor of all the charges which the depositor has bound himself to pay.

Other remedies
Whether a warehouseman has or has not a lien upon the goods, he is entitled to all remedies
allowed by law to a creditor against a debtor for the collection from the depositor of all charges and
advances which the depositor has expressly or impliedly contracted with the warehouseman to pay
(WHR Law, Sec 32).

Against whom the lien could be enforced?

The lien may be enforced against the goods of the following:
1. Goods belonging to the person who is liable as debtor; and
2. Goods belonging to others which have been deposited at any time by the debtor with
authority to make a valid pledge (WHR Law, Sec. 28).

The warehouseman shall not thereafter be liable for failure to deliver the goods to
the depositor or owner of the goods or to a holder of the receipt given for the goods when
they were deposited, even if such receipt be negotiable (WHR Law, Sec. 36).

Manner of conducting the execution sale to satisfy the warehousemans lien

1. Notice of the sale
a. published once a week for two consecutive weeks in a newspaper published in the
place where such sale is to be held; or
b. If there is no newspaper published in such place, the advertisement shall be
posted at least ten days before such sale in not less than six conspicuous places
therein.
The notice shall indicate the following:
a. Description of the goods to be sold;
b. Name of the owner or person on whose account the goods are held; and
c. Time and place of the sale

2. Sale shall be held not less than fifteen days from the time of the first publication.
3. In the place where the lien was acquired.
NOTE: The balance, if any, of the proceeds of the execution sale shall be held by the warehouseman and
delivered on demand to the person to whom he would have been bound to deliver or justified in
delivering goods (WHR Law, Sec.31).

What is the effect of the non-publication of the notice of sale?

Where the sale was made without the publication required and before the time provided by
law, such sale is void and the purchases of the goods acquires no title to them.

A person claiming right over the property may stop the execution sale of the goods
At any time before the goods are so sold, any person claiming a right of property or possession therein
may pay the warehouseman the amount necessary to satisfy his lien and to pay the reasonable
expenses and liabilities incurred inserving notices and advertising and preparing for the sale up to the
time of such payment (WHR Law, Sec.33).

What are the instances when a warehouseman may lose his lien?
1. By surrendering possession thereof, or
2. By refusing to deliver the goods when a demand is made with which he is bound to comply (WHR Law
Sec. 29).

NOTE: Where a negotiable receipt is issued, with the exception of the charges for the storage or
preservation of goods for which a negotiable receipt has been issued, the lien exists only for other
charges expressly enumerated in the receipt so far as they are written although the amount of the said
charge is not stated.

When Warehouseman fees and charges cease to accrue

The warehouseman fees and charges cease to accrue from the date of rejection by the
warehouseman to heed the lawful demand by the endorsee of the quedan for the release of the goods
(PNB v. Sayo, Jr., Supra)

BAR Q & A

Q: Coco was issued by a Warehouseman a negotiable receipt for safekeeping by the latter of his
goods. Can the judgment creditor of Coco levy by execution the goods covered by the negotiable
receipt?

A: The goods cannot, while in the possession of the warehouseman, be attached by garnishment
or otherwise, or be levied upon under an execution unless the receipt is first surrendered to the
warehouseman, or its negotiation enjoined. The warehouseman cannot be compelled to deliver the
actual possession of the goods until the receipt is surrendered to it or impounded by the court.

Q: Assuming that prior to the levy, the receipt was sold to Yoyo on the basis of which he filed a claim
with the sheriff. Would Yoyo have better rights to the goods than the creditor? Explain your answer.
(1999 Bar)

A: YES. Yoyo, as a holder for value of the receipt, has a better right to the goods than the
creditor. It is Yoyo that can surrender the receipt which is in its possession and can comply with the
other requirements which will oblige the warehouseman to deliver the goods, namely, to sign a receipt
for the delivery of the goods, and to pay the warehouseman's liens and fees and other charges.

Q: What is the proper recourse of the warehouseman if he is uncertain as to who is entitled to the
goods? Explain. (2005 Bar)

A: Since there is a conflicting claim of ownership or title, the warehouseman should file a
complaint in interpleader requiring the claimants to interplead. The matter involves a judicial question
as to whose claim is valid.

Rule where a warehouse receipt is transferred to secure payment of a loan by way of pledge or
mortgage
 The pledgee or mortgagee does not automatically become the owner of the goods but merely
retains the right to keep, and with the consent of the owner to sell them so as to satisfy the obligation
from the proceeds for the simple reason that the transaction is not a sale but only a mortgage or pledge.
Likewise, if the property is lost without the fault or negligence of the mortgagee or pledgee, then said
goods are to be regarded as lost on account of the real owner, mortgagor or pledgor (PNB vs. Sayo, Jr.,
G.R. No. 129198, July 9, 1998).

Q: Alex deposited goods for which Billy, warehouseman, issued a negotiable warehouse receipt
wherein the goods were deliverable to Alex or order. Alex negotiated the receipt to Caloy. Thereafter,
Dario, a creditor secured judgment against Alex and served notice of levy over the goods on the
warehouseman.
a. To whom should the warehouseman deliver goods upon demand?
b. Would your answer be the same if the warehouseman issued a non-negotiable

A:
a. Billy should deliver the goods to Caloy. Under the Warehouse Receipts Act, the goods covered
by the negotiable receipt cannot be attached or levied upon directly by the creditor. The creditor must
resort to attaching or levying the receipt itself, not the goods, while in the possession of the debtor,
Alex. Since Alex has already negotiated it to Caloy, Dario cannot anymore attach or levy the goods under
the warehouse receipt.

b. A non-negotiable warehouse receipt is transferred thru simple assignment. Since Alex

negotiated it instead of having it assigned, the conveyance of the warehouse receipt to Caloy is not
valid. Hence, Alex is still the owner of the said goods. Dario could now attach or levy the goods.

Q: Jojo deposited several cartons of goods with SN Warehouse Corporation. The correseponding
warehouse receipt was issued to the order of Jojo. He endorsed the warehouse receipt to EJ who paid
the value of the goods deposited. Before EJ could withdraw the goods, Melchor informed SN
Warehouse Corporation that the goods belonged to him and were taken by Jojo without his consent.
Melchor wants to get the goods, but EJ also wants to withdraw the same.
a. Who has a better right to the goods? Why?
b. If SN Warehouse Corporation is uncertain as to who is entitled to the property, what is the proper
recourse of the corporation? Explain (2005 Bar)

A:
a. Ej has better right to the goods. The goods are covered by a negotiable warehouse receipt
which was indorsed to EJ for value. The negotiation to EJ was not impaired by the fact that Jojo took the
goods without the consent of Melchor, as EJ had no notice of such fact. Moreover, EJ is in possession of
the warehouse receipt and only he can surrender it to the warehouseman (Sec. 8, WHL).
b. Under the Sec. 17 of Act 2137, Warehouse Receipts Law, SN Warehouse Corporation may file
an action for interpleader and implead EJ and Melchor to determine who is entitled to the said goods.

Q: T delivers two refrigerators to the warehouse of W who then issues a negotiable receipt
undertaking the delivery of the refrigerators to T or bearer. T entrusted the receipt to B for
safekeeping only. B negotiated it, however, to F who bought it in good faith and for value. Who is
entitled to the delivery of the refrigerators? (2011 Bar)

A: F, since he is a purchaser in good faith and for value.

Between the real owner of the goods and an innocent purchaser for value acquiring the Warehouse
Receipt from a thief, the former prevails If the goods were stolen from the owner and deposited to the
warehouseman who subsequently issued a warehouse receipt which in turn was duly negotiated to an
innocent purchaser for value, the owner has the better right than the holder of the negotiable
warehouse receipt. This is because a thief transfers no title.